Installed Building Products, Inc. (IBP) Q3 2014 Earnings Report, Transcript and Summary

Greeting. And welcome to the Installed Building Products Third Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Jason Niswonger, Head of Investor Relations. Please go ahead, sir.

Good morning. We would like to thank you for joining us today for Installed Building Products third quarter 2014 earnings conference call. Earlier today we issued a press release on our financial results for the quarter, which can be found in the Investor Relations section on our website at www.installedbuildingproducts.com. On today’s call, management’s prepared remarks and answers to your questions contain certain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include statements concerning demand for our services, expansion of our business, improvements in the U.S. housing market and our end markets, our ability to strengthen our market position, our ability to pursue value enhancing acquisitions and expectations regarding our sales and growth in 2014. Forward-looking statements may generally be identified by the use of words such as, anticipate, believe, estimate, expect, forecast, intend, plan, and will or in each case they’re negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature forward-looking statements involve risks and uncertainties, because they relate to events and depend on circumstances that may or may not occur in the future. As a result, actual events may differ materially from those expressed and/or suggested by the forward-looking statements. Any forward-looking statement made by management on this call speaks only as of the date hereof. A full discussion of the company’s operations and financial conditions, including factors that may affect our business and future prospects is contained in documents it is filed with the SEC, and will be contained in subsequent periodic filings made with the SEC. New risks and uncertainties come up from time-to-time and it is impossible for the company to predict these events or how they may affect it. The company has no obligation and does not intend to update any forward-looking statements after the date hereof, except as required by federal securities laws. In addition, management uses certain non-GAAP performance measures on this call. You can find a reconciliation of such measures to their nearest GAAP equivalent in the company’s earnings release, which is available on our website. This morning’s conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; and Michael Miller, the company’s Chief Financial Officer. Now I will turn the call over to Jeff.

Thanks, Jason. And thank you everyone for joining us today to review our results for the third quarter of 2014. I would like to begin with the summary of our operating highlights, followed by an update on our markets. I will then ask Michael Miller to follow with some additional details on our quarterly results and capital position, and finally, after our prepared remarks, we’ll open up the call for questions. During the third quarter, we continue to strengthen our company’s position as the second largest installer of insulation products to the new residential construction market throughout the United States. We accomplished this by producing another quarter of impressive revenue and profitability growth, while also taking steps to further enhance our balance sheet and capital position to support the ongoing expansion of our business into new and existing markets. Since June we acquired two high-quality installation installers bringing our total acquired revenue to approximately $30 million in 2014 and strengthening our presence in several key growth markets. Our primary approach to growing our same branch sales focuses on delivering an exceptional level of customer service in each of our market. We continue to strengthen the market opportunity for all of our local branch operations through an extensive level of expertise in all aspects of the installation process, including the direct purchase of materials from national manufacturers, the timely supply of materials to job sites and the quality installation of the products for our customers. Our rigorous customer focus and strategically positioned footprint combined with the overall positive trends in new residential construction drove our sales up 21% to $140.5 million, compared to the prior year quarter. Adjusted EBITDA grew by 70% to $14.6 million and adjusted net income improved to $6.3 million as a result of continued execution of our growth strategy and our disciplined approach to managing costs. Additionally, our excellent supplier relationships and vertically-integrated distribution and service capabilities support a favorable pricing environment in our markets for us to effectively manage material inflation. We are very proud of our third quarter result, which continues our track record of solid performance. Since 2011 we have grown our sales at a compound annual growth rate of nearly 30% and our adjusted EBITDA at roughly 90% compounded annual growth rate. During the third quarter, housing completions continued to improve compared to the prior year period. Our same branch sales grew approximately 18% during the quarter. In our primary single-family end market, same branch sales improved approximately 17%, compared to an increase in U.S. single-family housing completions of approximately 9% in the third quarter. Our same branch sales increased in excess of the pace of the national housing recovery, reflecting our dedication to exceptional service throughout our branches and the successful investments we have made to scale our business and optimize our operations. To that end, we continue to actively pursue opportunities to grow our business in strategic markets across the nation. As previously announced, in August, we acquired Marv's Insulation, which marked our entry into the Boise, Idaho market through a leading local operator with over 25 years of experience. With our presence established, we are now positioned to further expand our operations in this market with both local and national builders. On Monday, we announced the acquisition of Installed Building Solutions, a highly complementary installer of insulation, which enhanced our market opportunity in Minnesota, Wisconsin and North Dakota. With trailing 12-months revenues or approximately $70.4 million as of September, this acquisition meets our strategic growth objectives with strong market share and excellent customer relationships. We have a well-crafted approach to acquisitions with our proven and successful process for sourcing accretive transactions, which enables us to capitalize on attractive growth opportunities to further expand our reach. Our industry is highly fragmented, allowing us to identify regional insulation installers in attractive markets where we can enhanced value through our organizational structure, national platform and operational expertise, while retaining local brands, talent and customer relationships. In summary, we are encouraged by our strong momentum year-to-date and we expect our revenue growth to continue to outpace single-family residential construction activity, moving into the end of 2014. We believe the fundamental drivers in place for sustainable long-term housing recovery, and we have the right strategy in place to capture rising share of this construction activity. We are making steady progress towards our longer-term target of regaining our mid-teens EBITDA margins and we remained focused on controlling costs and leveraging our platform to enhance our profitability. I will now turn the call over to Michael to provide more details on our third quarter results.

Thank you, Jeff and good morning everyone. In the third quarter of 2014, we continue to grow our revenue on a solid base, while remaining disciplined with our cost to expand our margins. We also strengthened our capital position with the new $100 million credit facility. For the third quarter, our revenue increased 21.1% and improved 17.7% on a same branch basis, which was attributable to an increase in volume in all of our end markets, with some additional benefits from the mix of jobs and the higher average price per job. Our same branch single-family sales growth of 16.9% exceeded the 9.3% increase in single-family U.S. housing completions during the third quarter, reflecting outperformance by our strong local market. We continue to leverage our growing sales to improve our profitability in the third quarter. We recorded EBITDA and adjusted EBITDA of $14.6 million, representing a 69.6% increase from $8.6 million in the prior year quarter. We recorded no EBITDA adjustments in the current quarter or the prior year quarter, so our adjusted EBITDA and EBITDA figures were the same for each respective period. As a percent of net revenue, our adjusted EBITDA improved to 10.4% or a 300 basis point increase from 7.4% in the prior year quarter. We are pleased with the successful steps that we have taken to increase operating efficiency and significantly expand our adjusted EBITDA margins, which serves as our most useful profit metric to measure our operating performance. We increased our gross margin to 28.2%, or 240 basis points higher than the 25.8% in the prior year quarter. Our gross margin before depreciation expense expanded to 30.3%, improving 260 basis points from 27.7% in the prior year quarter, primarily due to increase productivity at our branch locations and favorable price mix change, offsetting some raw material inflation. We believe gross margin excluding depreciation more accurately reflects the progress we are making in our core operations. Selling and administrative expenses as a percentage of net revenue decreased 20 basis points to 20% from 20.2% in the prior year. Our core SG&A improvement on higher sales more than offset additional costs associated with being a publicly traded company. We expect our reported SG&A expense as a percent of net revenue to continue to improve over time, as we further scale our operations and benefit from increased sales as our end markets continue to improve. Adjusted net income from continuing operations for the third quarter was $6.3 million, or $0.20 per diluted share, compared to $3.1 million, or $0.14 per diluted share in the prior year quarter. Adjusted net income in the third quarter 2014 included the write-off of capitalized loan costs related to the replacement of our prior credit facility. On a GAAP basis, net earnings were $0.19 per diluted share, compared to $0.06 per diluted share in the prior year quarter. Now moving on to our balance sheet and liquidity, as previously announced, in July, we entered into a new five year $100 million senior secured credit facility, consisting of a $76 million revolving line of credit and the $25 million term loan, which replaced the company’s prior $50 million revolving credit facility. We are pleased with the terms of this facility, which provides us with an attractive source of capital to continue accomplishing our growth initiatives. Year-to-date in 2014, we have generated $14.7 million of cash flow from operations, an increase of $12.1 million from the prior year period. We have used this cash flow to fund our acquisition, reinvest in our business and strength our balance sheet. Year-to-date our depreciation of $8.7 million approximated 2.3% of net revenue. Going forward, we would expect our annualized depreciation to trend around this level as a percentage of net revenue. Capital expenditures of $2.6 million represented 0.7% of net revenue and new capital lease obligations of $13.6 million or 3.6% of net revenue. At the end of the third quarter, we had total cash of $24.7 million and our $75 million line of credit had no outstanding borrowings. With our strong capital position and asset like business model, we have significant financial flexibility to continue investing in our business and capitalize on attractive growth opportunities in front of us. I will now turn the call back to Jeff for closing remarks.

Thanks, Michael. The progress we are making to improve our business across all of our key markets is encouraging as we look to 2015 and beyond. We have a strong network of market leading branch locations on a well-established national platform and we have a growing pipeline of attractive acquisition opportunities to further leverage that platform. Additionally, we hold a critical position in the housing industry, which enables us to focus on customer service and execute our profitable growth strategy. Finally and importantly, our management team is highly aligned with shareholders. As a result of these factors, we feel we are well-positioned for long-term success as we continue to grow our business and improve our position as a leading installer of installation throughout the U.S. We look forward to updating you on our progress in 2015 and the years to come. Operator we would now like to turn the call over for questions.

[Operator Instructions] Our first question today is coming from David Goldberg from UBS. Please proceed with your question.

Congratulations on a good quarter. Can you guys talk a little bit about -- you mentioned that you’re still seeing a relatively favorable pricing environment and that comes sort of despite what we’re seeing in terms of maybe lower than expected growth in completions and housing starts. Can you talk a little bit about those dynamics and the trends you’re seeing there?

Sure, Susan. Good morning. It’s Michael. Thanks. We were pretty pleased with the quarterly results. Now what I would say is that a couple things. In the quarter one of the things that happened again that we’re very pretty pleased with is that we saw a very solid growth in all of our end markets, so a 20-plus growth in single-family, multi-family, commercial and repair and remodel. And that mix that favorable mix of that business and that growth in that business has really helped us to continue to scope the business in the right way that has allowed us to improve margins and improve operating efficiencies.

Susan, this is Jeff. I would add to that that it’s still about performing really at the local level and getting the job done in those. They have the resources and capabilities to perform exactly the way the builders want us to are the ones. They’re really getting the work and are able to therefore -- like we said all along, it’s a bit of a product that need to get done quickly in order to move the house in the process. It’s a small sale and it’s all about execution. So as long as we are doing that, we really have tended to be the contracted choice a lot of times absolutely.

We are doing an excellent job of executing, doing well and performing at the local level from a service perspective.

Okay, great. And then in terms of the acquisitions that you have done, these have been in sort of small markets and maybe markets where you don’t think of there being as much growth in terms of housing starts and not as much of a focus for some of those larger builders. Can you talk a little bit about how we should think about the benefit that you get from these deals in terms of a topline perspective as opposed to maybe the profitability? And how that could compare to some of the other markets that maybe tend to be a little bit larger or more of a focus for some?

We are seeing good growth in all of our markets and we would expect that the acquisitions overtime would be growing at a similar rate to all of our businesses, whether it got like to be geographic businesses from time to time. Generally speaking they all trend to consistency with our overall business from a topline perspective. The markets, well, I mean, Minneapolis, which is the primary market and we saw building solutions. That is the big housing, good, very good housing market. And while it may not be in the smile, there are some people we heard to. We see great opportunity with that acquisition.

It’s Jeff again, but we are not in anyway deemphasizing any of these that might be more -- consider kind of more headlines. It’s just the way the chips have fallen thus far in terms of the acquisitions that you have actually closed versus those we might still be working on, absolutely

And what is the profitability like in terms of some of the smaller ones maybe relative to some larger markets? Can you give us any sense of that?

It’s really very market specific. But generally speaking, we would expect say for example in acquisition like Installed Building Solutions to come into that mid teens EBITDA margin that we consistently talk about the overall business getting back to it.

Okay. That’s helpful. Thank you.

Thank you. Our next question today is coming from Nishu Sood from Deutsche Bank. Please proceed with your question.

Thank you. I wanted to ask also about pricing. There has been some announcement here from some of the major manufacturers, 12% to 18% midteen price increases effective for early 2015. So wanted to get your thoughts on the potential flow through of those going forward, given the housing environment the way it is and how that might benefit you folks from a sales and margin leverage perspective?

Hi Nishu. This is Michael. Yeah, that’s absolutely true. The manufacturers announced in October for price increase to be effective in January. One of the nice things about our business quite frankly is that we have such great lead time in terms of Maryland rent price increases when they are announced and when they actually take effect. It allows us to create a dialog with our customers around potential price increases which is a positive thing. In history, it’s shown that we’d have an ability to pass on this price increases as appropriate to our customer base. So we believe that we’re going -- we will be able to continue to as and if their market price increases to be able to work with our customers to make sure that we maintain or increase our profitability on a go-forward basis. So clearly that is about us continuing to execute and perform very well service wise at the local level.

Are those price increases that were announced relative to what you would have expected given the market environment and conditions for the manufacturers. Are those stronger than you would expect it in line? What’s your take in that regard?

This is Jeff Edwards. I think that we can basically categorically say that they were generally in line with what we would have expected.

Got it. Great. And on the acquisition front, you folks have been very clear and consistent about your strategy. You discussed potentially adding $30 million to $40 million in revenues from acquisitions per year. You’re coming in right around that range. Now some of that dynamics and considering your acquisitions in a growth environment, the small businesses need working capital which is more difficult for a small business than a large business obviously such as yourselves. Obviously housing is coming a little bit slower than expected dampens -- obviously dampens that need. But then on the other hand, it might change some people’s longer term outlook as well since the housing recovery seems to be going slower. Sorry for the long question but my -- I guess what I’m getting at is here is as you look at your pipeline, how are the evolving conditions in the housing market affecting your pipeline. Are you more optimistic and when you think about that $30 million to $40 million, could you ramp it up some from there or do the conditions maybe we could come a little bit less than that going forward?

Nishu, this is Jeff Edwards. We -- there is a few places earlier where we mentioned being proud of our performance. And I would yet say that we are there by any means on the acquisition front. We are proud on the operating side but we know that we need to step it up and we are stepping it up, I think on the acquisition front. And I don’t know that kind of the macro housing environment has really changed our ability to pursue or lend these acquisitions so much. But I think one thing that has kind of been borne out is the slower on the longer length of this recovery really has made us feel even better about making those acquisitions now and earlier in the recovery based on how long we’re going to able to continue to work those acquisitions which will become -- come into the fold and then develop those over the years in this continued and proven housing market. So we feel great about that.

Got it. Great. And the last one, if I could, your incremental EBITDA margin took a step up in the third quarter, a nice step up to the low 20s. And that is through the going public process. We talked about the potential of the business to deliver low-to-mid 20s, incremental EBITDA margins. What is your sense on that? So can we expect that going forward? Are the conditions now in place to deliver that solid incremental EBITDA margin could accelerate even further as the housing recovery continues. How should we think about that?

Nishu, this is Michael. Yeah, we still feel very confident about our ability to do that 20% to 25% incremental EBITDA margin. I mean, it will be different quarter-to-quarter. In the year, it should average in the 20% to 25% range. And we don’t see any reason as to why that shouldn’t continue.

Okay. Great. Thanks a lot.

Thank you. [Operator Instructions] Our next question is coming from Jack Kasprzak from BB&T Capital Markets. Please proceed with your question. Jack Kasprzak - BB&T Capital Markets: Thank you. Good morning, everyone.

Hi. Jack Kasprzak - BB&T Capital Markets: Can you -- you mentioned price, Mike, in your comments was, I guess, a contributor to your increasing sales? Can you tell us what the impact of pricing was in the quarter?

We definitely saw price appreciation during the quarter, Jack, and its, because of the way that our products, our service, our every job is unique. So when we see job price appreciation, which we saw job price appreciation of about 5%. That’s not necessarily our price, part of that is mix as well. One think that was very positive in the quarter and it also continue -- is now continuing through in the fourth quarter is we’re contingent continuing to see or we’re seeing an accelerated rate of sales from our local and regional builders. And obviously, they tend to have -- they have a tendency to build a slightly higher per square footage house than some of the larger national builders might build, so the consequence our average job price will increase with that increase or recovery if you will in the local and regional builders. So we’ve been very encouraged by that trend and we think it will continue to help us push forward our sales growth above the market. Jack Kasprzak - BB&T Capital Markets: That’s very helpful. Thanks. And I assume, you mentioned, you talk about the insulation price increases that are well-telegraphed and advance for your purposes or for you guys. Are you assumed your pricing decisions are given the local match of your business? Just very jobs specific or job by job in the field or is that kind of way it goes or…

All right. It’s Jeff, Jack. Jack Kasprzak - BB&T Capital Markets: Hi, Jeff.

Although, a very large portion of our business that’s exactly the way it has. Yeah, I mean, pricing is set at a regional level but then obviously every single job is different and its priced separately based upon the parameters that they’ve provided at a regional and obviously levels from us as well. Jack Kasprzak - BB&T Capital Markets: Okay. Great. Thanks a lot.

Thank you, Jack.

Thank you. Our next question today is coming from Keith Hughes from SunTrust. Please proceed with your questions.

Sorry. Questions on kind of labor availability announcement pretty tight in most of the building, the building trade through the last couple of years and probably little bit to your benefit given your size and scale? Can you give the kind of view on labor availability actually in the year and what it could potentially look like in 2015? They may vary by region, so any kind of detail on that get will be great?

Yeah. I mean, we’re fortunate in that. We’ve had -- we’ve grown the business over 20% this year and we’ve been able to step up and handle that demand at the local level. And we believe that that’s a byproduct of our ability to attract and retain some of the best installers in the market and that’s based upon our local reputation within those markets. And while clearly there are some trades within the new home construction process that are experiencing labor constraint, fortunately as a company overall. We’ve not experienced that. And while we’re certainly, it’s something we are highly focused on as a company and we’ll continue to be focused on. We believe as we go through 2015 and continue to see above market growth in 2015 that will be able to meet the labor requirements and service our customers the way that we have continued to.

Did you see amongst your smaller competitors and again, it will be a regional question, but amongst your smaller competitors, are they constraint from bidding on activity due to lack of labor?

This is Jeff. I’ve mentioned earlier kind of the ideas that the reason why we’re winning on lot of instances is based on resources. And that would have been core for a lot of things but certainly it would have included labor in addition to trucks and other things working capital et cetera. But I don’t know if it would be specific to a company or to a competitor to have been able to not handle that. But I can, I mean, it may sound a little earlier like we’re down point. The importance of labor which by no means is the case but what I would say is that we work hard on it everyday at every branch. And I’d be remissive, I didn’t say that and our managers and the guys that are doing that -- working that part of the business everyday, frankly, deserve with the applause in outlay. So Michael will able to answer the question the way he did. I think he said something. So we’re all proud of their ability to handle that part of the business.

Okay. Thank you.

Thanks. Our next question today is coming from Bob Wetenhall from RBC Capital Markets. Please proceed with your question.

Hey, good morning and nice quarter. Wanted to ask you going forward, do you see the opportunity in the margin side more from favorable operating leverage and gross profit or is it more going to be leveraging your SG&A?

That’s a great question. It’s really going to come both from gross profit leverage or as improvement operating efficiency in gross profit and then also administrative leverage. On the selling expense side, we really don’t get that much operating leverage to be honest with you but we do on the administrative side. Perfect example is that is the acquisitions are very accretive or create a lot of operating efficiencies for the corporate office. We now see acquisition in Installed Building Solutions on Monday about $20 million of revenue. We don’t have to add any incremental cost at corporate office in order to support that business. So we think with the combination of acquisitions and also the growth in the market, we’ll continue to see sort of a operating leverage, leverage on the administrative side, certainly operating efficiency, within the gross margin. And fortunately in the third quarter, if you adjust our second quarter administrative expenses for the charges associated with the IPO in the follow-on, we are basically flat quarter-to-quarter. And so we believe we’ve gotten in the administrative side or administrative expense. We really gotten a lot of that noise if you will, out of the numbers associated with being a publicly traded company. And we are more at a run rate level that now we can continue to get some operating leverages on it.

That’s helpful. On your IBS acquisition, congratulations number one. Could you talk to what kind of EBITDA multiple you hit and the revenue growth for the acquired company?

Yeah. That deal is very consistent with the deals that we’ve done in the past. And we feel very good that it will be -- obviously it’s going to have very little impact in '14 given the timing of when we acquired it. But we are very excited about what it will be able to bring to incremental growth and incremental EBIDTA in 2015. And as I think I mentioned earlier, we would expect that it’s going to be at a mid-teens EBITDA margin contribution.

Okay. Fair enough. And final question, kind of thinking about you are outpacing national growth rates in housing, which is great. Would it be -- just as a ballpark or two bookings, would somewhere like $575 million to $600 million be the right way to think about revenues in '15? Thanks and good luck.

As you know, we have not started providing guidance yet. We have considered doing that on a go-forward basis, but at this point, we are not allowed to guide it. So we are confident in our ability to outpace that continued recovery in the new home construction market. A great thing about our business model is that we can flex the business. Whether it’s a 1 million starts next year or 1.1 starts next year or 1.2 starts next year, we have the ability to flex the business to meet that demand and we’re confident that we will continue to see growth above what the overall market is experiencing.

[Operator Instructions] Our next question today is coming from Ken Zener from KeyBanc. Please proceed with your question.

Good morning, gentlemen.

Good morning. How are you?

Doing well. If you could talk Jeff or Michael about the gross margin, I think it’s running a bit richer than you guys perhaps might have thought at the beginning of the year. Is that accurate or not accurate?

It is accurate. I mean, we are very pleased with the targets we are making.

And is that -- I know the administrative side, which you’ve kind of locked in is around $20 million now. Will that be kind of flat sequentially in 4Q? Or is there some seasonality or other items that we might want to know about?

Yeah, there is some seasonality within administrative expenses, but it’s certainly not as seasonal as our sales are.

Right.

And keep in mind that the administrative expenses are not clearly only a fraction of it are on corporate office expenses. The bulk of that is administrative expenses at the branch level. And those tends to flex a little bit more with revenue than certainly the corporate office expenses looked, which is why we like to talk about the 20% to 25% incremental EBITDA margins, because I think that’s the right way to look at the operating leverage that comes into the business.

Okay. And then related to the gross margins coming in better and in your earlier discussions the volumes, the sales, I thought, initially we are going to have much more of an impact on SG&A and it seems to actually be coming through more on the gross margin. And you talked about productivity, things like window time. Does -- you have a full rating roughly 200 basis points over last year in the second and third quarter. I mean, what would it take to have that type of margin expansion next year? Is it similar rate of growth in the topline or how much of that is now the conversion over to pricing coming through from the manufactures, you being able to recover it and/or maybe some on top of that? How does that dynamic kind of unfolding? You are obviously knocking 15%, but just you could put it within the multi-year period as demand rises?

Yeah. We believe that, as we stated and adjusted in those comments that we will regain mid-teen EBITDA margin in this business. This third quarter was the first time that we reported double-digit EBITDA margins of 10.4%.

Okay.

But if think of the mid-teen as you know, 15% to 16%, we believe there is -- over time as the market reaches stabilization that there is probably an additional 300 basis points in gross margins and 300 basis points and more in operating leverage and administrative expenses. And that’s over time as the market comes to stabilization. And keep in mind we’re primarily a new single-family construction company. 75% of our revenue comes from the single-family construction and on an [LTM] [ph] basis through September, single-family completions were only at about 600,000, which is really half of what I think -- we would think as stabilization. So there is a lot of opportunities for us as a company to kind of grow revenue with the market as it comes back to stabilization and continue to improve those margins and improve the operating leverage in the business.

This is Jeff. There is still some tailwinds a bit too and I expect those to drag into 2015, in terms of energy code compliance, size of home coming up a bit, mix, a number of other things that along with that are helping us in that way. Honestly, as long as it’s fair, a rising price environment is I think what for everyone assuming it happens all the way chain.

Okay.

And we don’t want it necessarily kind of overstate this point. But in the third quarter as I’ve said earlier, again, coming into the fourth quarter, we were very pleased to see the acceleration of growth within our local and regional customer base, because we really believe at some extent that’s kind of -- as a leading indicators for the next leg of the housing markets recover, in terms of single-family starts getting back to a more normalized rate versus whether single-family, multi-family [indiscernible] ’14.

Right. That was actually -- that was going to be my last question because I thought that comment was very interesting, given where you are in the construction. Was that more regional given that you are in markets likes Idaho, or was that within markets that people generally think or dominated by the more publics who are probably squeezing a bit more on price but giving you the efficiency?

Yeah. There is no doubt that we as a company, have a higher correlation or a higher percentage of our sales in the North East to Mid-West, which is approximately 50% of our revenue. But only 30% of the permits are generating in that market. But that market does tend to be more, sort of local and regional builders than national builders. But that comparison or that trends that we were talking about is year-over-year, so we are comparing sort of same branch analysis, if you will. And we think fundamentally, the recovery that we are seeing in that part of the business, at least kind of [indiscernible] initially here, it seems -- we believe it’s good for the overall housing market.

Thank you.

Thank you. We’ve reached end of our question-and-answer session, and I would like to turn the call back over to Mr. Edward for any further or closing comments.

No. I’d just like to thank everyone for all your questions today, and I look forward to our next quarterly update and conversations. Thank you.

Thank you.

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.